Joint Ventures: What and Why

• Pages: 7-20

CHAPTER II

JOINT VENTURES: WHAT AND WHY

“[G]lobal and innovation-based competition [continues] to drive

firms toward ever more complex collaborative agreements.”1 Firms enter

into joint ventures for a multitude of procompetitive reasons, such as to

lower costs, obtain economies of scale, increase production capacity,

pool research and development resources, commercialize new products,

and facilitate entry into new markets.2 Joint ventures play an integral role

by allowing firms to share in the business risks associated with these

procompetitive objectives, which drives innovation, expands consumer

choices and lowers costs (and presumably, prices). At the same time,

joint venture parties risk running afoul of antitrust laws as close

cooperation with potential or actual competitors can spill over into

anticompetitive conduct, including price fixing, the curtailing of

competition outside the venture, or other collusion between the venture’s

parents, such as limiting a third-party rival’s supply of a needed input.3

1. Comments and Hearings on Joint Venture Project, 62 Fed. Reg. 22,945,

22,946 (Apr. 28, 1997) [hereinafter Project Hearings].

2. See, e.g., id.; U. S. DEP’T OF JUSTICE & FEDERAL TRADE COMM’N,

ANTITRUST GUIDELINES FOR COLLABORATIONS AMONG COMPETITORS,

Preamble (2000), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,161,

available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf

[hereinafter Competitor Collaboration Guidelines].

3. Cf. Charles A. James, Recent Developments and Future Challenges at the

Antitrust Division, Address Before the Dallas Bar Ass’n (Sept. 17, 2002)

(“[W]e also have launched a number of important joint venture

investigations involving, among other products, on-line media, financial

services and electronic air passenger ticketing. Joint ventures are a high

priority for the Division, in part because we believe that many firms are

turning to joint ventures as an alternative to mergers, and in part because

joint ventures are an important way in which competitors interact with

each other in emerging markets.”), available at

http://www.justice.gov/atr/public/speeches/200239.htm.